Canadian Solar Will Get Better Despite Recent Weakness

Due to a mix of different factors such as low oil prices and weak financial performances, Canadian Solar (CSIQ) is down 17% this year. For instance, last quarter, Canadian Solar’s top line remained almost stagnant, while its net income saw a steep drop. However, management is of the opinion that it will confront supply constraints over the next few quarters, which implies that the demand will be high. But, Canadian Solar’s moves indicate that the company is focused on getting better going forward.

What next?

Canadian Solar is doing the right thing by holding some of its project and improving the balance sheet.

This will enable the company to build and stage adequate inventory to capture an increase in expected demand in the solar market going forward.

Moreover, the company has a strong presence in the global market that should lead to better returns for its shareholders in the future. In fact, it has increased its brand recognition in Asian countries such as China, Japan, and India where it shipped over 100 megawatt of modules in the previous quarter. This is good news for investors as demand for solar modules is expected to rise in these Asian countries going forward.

Moreover, as per IHS, global solar PV capacity is expected to reach nearly 500 GW in 2019. This is 177% higher than last year, indicating that a lot of room for growth is available for solar companies. In fact, IHS expects the total global solar PV demand to grow steadily as a number of countries have solar installations at the gigawatt level, reducing demand volatility. Hence, the opportunity is there for Canadian Solar to improve its financials, and the company is undertaking smart steps to make the most of the opportunity.

The acquisition of Recurrent Energy will strengthen its pipeline

Canadian Solar, during the second quarter, acquired Recurrent Energy, a leading North American solar energy developer. This is a good move as it will expand its total project pipeline to 8.5 GW with approximately 2.4 GW of late-stage projects. Also, the company will have a stronger position in North America in the business of ownership and development of solar power plants in the region.

I think that this acquisition by Canadian Solar is a good move by the company as according to EIA, solar energy consumption in the United States is expected to increase 101% to 0.613 quadrillion British thermal units (“Btu”) in 2016 as compared to 2013 levels. This indicates a promising prospect for Canadian Solar in the U.S.

Conclusion

Canadian Solar’s financial performance might not have been great this year, but a rebound in the long run cannot be ruled out as the company is tapping the right markets for growth. So, the weakness in Canadian Solar’s performance on the stock market this year looks like an opportunity in disguise for investors to consider.